Legal Case Summary
Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd  AC 32;  2 All ER 122; 111 LJKB 433; 86 Sol Jo 232; 167 LT 101; 58 TLR 308
CONTRACT, FRUSTRATION, PAYMENT ON ACCOUNT OF PURCHASE PRICE, RECOVERY, FAILURE OF CONSIDERATION, SALE OF GOODS, CHANGE OF CIRCUMSTANCES DUE TO WAR, OUTBREAK OF WAR, CLAUSE PROVIDING FOR EXTENSION OF DEADLINE
The respondents, an English company, agreed to sell to the appellants, a Polish company, machinery for £4,800. This was done by a written contract. One-third of the price was to be paid with the order. The deadline for the delivery of the machinery was three to four months after the settlement of the final details. The contract contained a CIF term, requiring the English company to arrange the delivery by sea to Gdynia, Poland. The delivery was subject to certain terms and conditions. Clause 7 of the contract provided for granting of a reasonable extension of the delivery deadline in case of hindrance of the dispatch of the goods due to war or any other cause beyond the control of the English company. The Polish company paid only £1,000 from the required £1,600 deposit to be paid upon placing the order. On 1 September 1939, a war broke between Germany and Poland and on 3 September, Great Britain declared war on Germany. As a result, Gdynia was occupied by the Germans and the English company decided not to dispatch the goods. The Polish company wanted to recover the £1,000 paid as a deposit. The Court of Appeal ruled in favour of the respondents and the case escalated to the House of Lords.
(1) Did the express provision on war in Clause 7 of the contract prevent the frustration of the contract.
(2) Were the appellants entitled to recover the deposit money?
Decision / Outcome
The appeal was allowed.
(1) Clause 7 was limited only to a delay in respect of which a reasonable extension might be granted. The war was not such a delay because it involved prolonged and indefinite interruption of the prompt contractual performance. Therefore, Clause 7 did not prevent the frustration of the contract.
(2) As there was a total failure of consideration and under the contract the payment of the £1,000 deposit was not an absolute, final and “out and out” payment, but a conditional payment on account of the purchase price, the appellants are entitled to recover that sum from the respondents.
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